For the first time in its 54-year history, Columbus-based supplemental insurance company Aflac has acquired another insurance company.
Aflac announced late Wednesday afternoon that it will purchase privately owned Continental American Insurance Company — formerly Carolina Continental Insurance Company — for $100 million. The deal is expected to be finalized at the end of the year with Aflac agents selling Continental American products by early next year.
Continental American, based in Columbia, S.C., is tiny in revenue and reach compared to Aflac, but it brings a platform that could allow Aflac, which sells in the United States and Japan, to expand its U.S. business operation, said Aflac Inc., President Paul Amos II.
“We have always through the last 54 years, viewed the opportunities before us,” said Amos, who oversees Aflac’s U.S. operations. “We look at those opportunities through a tiered system. This one made it through all the tiers.”
“It doesn’t take us out of the core business we are in,” Amos said. “Most other insurance companies are in other areas, they sell annuities and financial products. This is the perfect fit.”
Continental American and Aflac have similar business approaches. Both companies sell their products to customers through the policyholder’s employer, but they do it in a little different manner.
Aflac sells payroll deduction policies directly to the employee. Continental American sells group policies to the employers, who then offer the insurance to their employees at a cost.
Aflac relies on one of the largest field forces, about 75,000 agents, in the country, while Continental American has a limited sales force, just six agents, but heavily relies on a network of more than 4,000 insurance brokers.
“The platform that is best suited for the majority of American businesses is selling to the individual, which is what we do,” Amos said.
“But some large businesses as well as part of the insurance brokerage community are increasingly demanding a group platform. Now, I did not say all of them, but more and more are.”
There is a vast difference in the size of the two companies. Aflac has more than 8,000 employees worldwide, while Continental American has 163. The merger should not have an immediate impact on jobs at either company, Amos said.
“We expect this to remain a standalone company,” Amos said. “They are doing a great job. We can leverage each other’s strengths. We are not only buying the company, we are buying the people.”
In 2008, Continental American had total revenues of $79 million and net income of $7 million. Compare that to Aflac, which had $15.4 billion in revenue and made $1.63 billion.
Last year, Continental American generated about $112 million in premium income. Aflac’s four largest districts — Texas, California, Florida and Georgia — each write substantially more than that in a year.
Aflac Chairman and Chief Executive Officer Dan Amos said the move should help improve U.S. sales growth.
“While Continental American Insurance Company is small from a financial perspective, we believe it brings distinct value and potential to Aflac U.S.,” Amos said in a prepared statement. “Aflac will gain access to an attractive portfolio of voluntary group worksite products that complement the individually issued insurance products we have sold at worksites for more than 50 years. Acquiring the capabilities to develop, price and administer voluntary group products will also help us better advance our insurance broker distribution initiative, while at the same time, continuing to meet the needs of our rapidly growing sales force of individual sales associates.”
Aflac executives have been working on the deal for about a year, Paul Amos said. The proposed deal was announced after the New York Stock Exchange closed at Continental American’s offices in Columbia and Aflac’s Columbus headquarters. Paul Amos was in South Carolina to meet with the Continental American employees.
As Aflac executives have studied the acquisition, the reaction has been positive, Paul Amos said.
“The limited internal group we have been able to share this with, the reaction has been ecstatic,” Paul Amos said. “...This is a huge win for our field force. It’s something they have been asking for.”
Now that the deal is public knowledge, Paul Amos said critical decisions, such as what to do with the Continental American name, will be examined.
“The company has a strong reputation, and they continue to grow,” he said. “We don’t want to just throw out their name. ... They are a small company and we could overwhelm them if we don’t plan properly.”